Canton mayor changed tune on doom, gloom

Matthew Rink

Tuesday

May 28, 2013 at 12:01 AMMay 28, 2013 at 12:24 PM

Canton Mayor William J. Healy II remained glum on the budget through 2012, even as conditions improved.

A year ago, Mayor William J. Healy II predicted a disastrous $4 million shortfall for the end of 2013. Starting with a tax hike, Healy began calling on City Council to approve sweeping revenue increases while promising a financial belt-tightening to avoid laying off 100 police officers and firefighters.

Healy, the two-term Democrat, continued the gloomy narrative through late October, even after the city certified more than $2 million of additional money, much of which had been in the city’s coffers for months.

The city still faced “the threat of a multimillion-dollar shortfall,” he said at the time. “We still have not closed that gap.”

More than a month later, when council approved the $52.9 million budget for 2013, Healy’s tune changed. The city, buoyed by a $3.5 million carryover, was in the “best financial shape in five years,” he said.

Some say the mayor stuck with his dire prediction throughout 2012 despite growing evidence to the contrary. Deputy Auditor Gary Young said Healy had some reason for concern in early 2012 because existing funding sources were shrinking, but that he did not pull back on his message even as other revenue streams began filling the city’s coffers.

“The only person saying that last year was the mayor,” Young said. “There was never any statement by the auditor’s office. ... We never believed it was true.”

CAUSE FOR CONCERN

Healy said he projected the multi-million shortfall because of additional cuts in state funding, and in some cases, the elimination of funding sources altogether. The city saw the revenue losses he predicted.

“It was absolutely real,” he said.

Canton lost another $775,000 in state-issued Local Government Funds and the inheritance tax, which averaged nearly $650,000 annually for the city from 2009 through 2011, had been eliminated, effective this year, by state lawmakers. The city also had to brace for the loss of a nearly $2 million federal grant used to employ police officers.

“The facts are our revenue declined by over $3.5 million,” he said. “To say it wasn’t true isn’t accurate. The reduction was there. We were able to build up a carryover throughout the year to make up for it. ...

“Just because I said it was the best (situation) we’ve been in in five or six years doesn’t mean we were in great shape.”

To counter the losses, Healy proposed a smorgasbord of revenue increases to City Council. He first floated the idea of an income tax or property tax levy, but later abandoned that option. He also unsuccessfully pushed to sell the mineral rights of city-owned land to oil and gas companies leasing acreage across the state for Utica Shale drilling.

He revisited an earlier idea to gin up revenue by placing traffic cameras at high-crash intersections to nab speeding motorists and red-light runners. A park tax, which will appear on the ballot this fall, a reduction of the income tax credit from 2 percent to 1.7 percent, and the shifting of street lighting costs to the capital improvement fund were among the proposals adopted by council.

Healy said his tough budget talk was necessary.

“The point is, it’s easy to spend money if you don’t have someone hanging over your head saying, ‘wait, wait, wait, if we do spend that money we’re going to be $3 to 4 million short,’” he said.

NEW MONEY

Young said the mayor only talked about the revenue the city was losing from the state, even though other new revenue was coming in.

“Every time he talked about it he only talked about what we were losing,” Young said.

The city eliminated Healy’s projected deficit for 2013 by building a carryover throughout 2012. The city expected to spend close to $52 million in 2012, but scaled back spending by $1.97 million. At the same time, revenue began to climb.

The auditor’s office recertified an additional $902,000 in March and another $1.16 million in October. It received another $1.2 million late in 2012, but did not add the money to the certificate because there was enough cash available to meet all of the city’s obligations.

The new money came from a variety of sources — income tax revenue, ambulance fees, a one-time grant for participating in a natural gas aggregation program, and the last-ever disbursement of inheritance taxes.

New revenue from the opening of the first of four casinos in Ohio was not a certified revenue source for the city heading into 2012. Even though there were questions about when and how much would be doled out to each of the state’s 88 counties and eight largest cities, Canton included, Young said the city knew it would receive something.

The first disbursement came in on July 31, 2012 in the amount of $163,000. Based on this, the auditor’s office determined that the city could expect just under $500,000 in casino revenue by the end of the year. Another windfall came from Canton’s participation in a natural gas aggregation program through FirstEnergy Solutions, which shelled out a $196,990 “civic grant” on July 13.

“It was never ‘we’re broke, we’re broke, we’re broke’ and then December comes and we’re OK,” Young said. “It was gradual.”

A GIFT

Healy, however, said he never felt comfortable until late November, when the city received an unexpected gift — a final inheritance tax disbursement that brought the total for the year up to less than $1.13 million.

The city could have ended the year with an even larger carryover, Young said, but chose to deposit $600,000 into its hospitalization fund and another $750,000 into its compensated absence fund, which is used to pay employees leaving their service with the city for benefits like accumulated sick leave.

Councilman Greg Hawk, D-1, called the city’s changing financial condition great news, but said the mayor’s claims never added up. Hawk, the former finance committee chairman, has voted for only one Healy budget: his first in 2008. He’s especially critical of what unfolded over the last year.

“No one yet has explained to me where that money came from,” he said. “No explanation was ever proffered. I thought it was a miracle of loaves and fishes. It’s great news, but we have to know how to conduct the city in a day-to-day fashion and ($3.5 million) doesn’t just materialize at one time.”

LEGITIMATE NEED

Despite the carryover, Healy said the city needs all of the revenue sources approved by council, including the money from the reduced income tax credit.

“We’re still projecting a $1.3 million shortfall for next year,” he said. “Those types of things had to happen along the way.”

The tax-credit reduction will impact city residents working in another community with an income tax. The credit dropped from 2 percent to 1.7 percent, meaning that a resident who works in another city still must pay Canton at least 0.3 percent.

The credit reduction, which did not require voter approval, took effect this year and the city will begin collecting on it in 2014. About 41 percent of W-2 filers took the tax credit in 2011.

It will generate roughly $400,000 for the general fund, about the same amount the city spent on raises for employees this year.

Healy and City Council approved raises for two unions, the American Federation of State, County and Municipal Employees and the Canton Police Patrolmen’s Association, and about 120 non-union employees. Elected officials have also received a 1.7 percent automatic raise that’s based on the U.S. Consumer Price Index.

The raises come from a variety of city funds, but about $397,000 will be paid from the general fund. Healy has defended the raises, saying that many workers have gone years without one.

WHAT’S NEXT?

Councilman Edmond Mack, D-8, a member of the finance committee, said he’s cautiously optimistic about the future.

“We still have a seven-figure shortfall to overcome, but with money available to give employees raises and with money there to fund various city projects there is a collective sense that things are improving,” Mack said.

Healy worries that further action by the state could cut into the gains made by the city. Income from Local Government Funds, inheritance taxes, personal property taxes and interest on investments has dropped from $10.3 million in 2007 to a projected $3.25 million this year, a 68 percent decline.

He believes the city should be able to close the $1.3 million shortfall being projected for 2014.

“We’re not in a crisis today, but we are in a cautious mode today where if we don’t take action, 2014 will be very challenging for us,” Healy said.

Reach Matthew at 330-580-8527 or
matthew.rink@cantonrep.com
On Twitter: @mrinkREP

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